Question: I would choose option three because it has the highest Estimate Per Shares, how would I explain this BTN9-3. aL Tn ye Business Decision Problem
I would choose option three because it has the highest Estimate Per Shares, how would I explain this
BTN9-3. aL Tn ye Business Decision Problem Kingston Corporation has total assets of $5,200,000 and has been earning an average of $800,000 before income taxes the past several years. The firm is planning to expand plant facilities to manufacture a new product and needs an additional $2,000,000 in funds, on which it expects to earn 18 percent before income tax. The income tax rate is expected to be 40 percent for the next several years. The firm has no long-term debt outstanding and presently has 75,000 shares of common stock outstanding. The firm is considering three alternatives: 1. Obtain the $2,000,000 by issuing 25,000 shares of common stock at $80 per share. 2. Obtain the $2,000,000 by issuing $1,000,000 of ten percent, 20-year bonds at face value and 12,500 shares of common stock at $80 per share. 3. Obtain the $2,000,000 by issuing $2,000,000 of ten percent, 20-year bonds at face value